Agricultural Economy

views updated Jun 27 2018

Agricultural Economy


Agriculture in an Industrial Economy. As the new industriai economy burgeoned, agricultural production also underwent profound changes. American farm output did not decline in the face of industriai growth; in fact, it grew at impressive rates over the last decades of the nineteenth century. New farmlands in the Dakotas, Nebraska, Kansas, and Colorado were linked by railroads and brought under cultivation. At the same time, farmers experienced fundamental, often unsettling, changes as they adapted to new conditions. By the late 1800s farm production was influenced by more impersonal market forces than ever before. Farmers depended heavily on banks for finance, railroads for shipping, and grain elevator operators for selling their crops. As a result, many farmers went into debt in the years after the Civil War. Whenever farm prices dropped, the financial pressures on farmers mounted steadily.

Wheat. Changes in the way wheat was shipped, stored, and sold typified the more general transformation in agriculture. Over the last decades of the nineteenth century two wheat processing centers emerged at the heart of a national network of distribution. In Minneapolis, Minnesota, a vast flour-milling industry developed and supplied new companies such as Pillsbury-Washburn. In Chicago, at the railroad hub that linked the farms of the West and Midwest to national markets, tens of thousands of carloads of wheat funneled through annually, each car carrying more than three hundred bushels. In 1890 alone, 150 million bushels of wheat moved through Chicago. To handle this volume, railroad companies and grain investors built huge grain elevators holding as many as five million bushels apiece; by 1888 Chicago grain elevators held thirty million bushels. Grain was divided and stored in the elevators by grade, the owner or agent receiving a receipt for this grain drawable from the elevators. These receipts were bought and sold, fueling a heated market in what were called grain futures. Other businessmen in the industrymillers, dealers, and exportersrelied on investments in grain futures to hedge against fluctuations in price and supply.

Meat. The production of meat underwent a parallel process of centralization. In 1881 the Chicago meat-packer East, Swift & Company made its first shipment of butehered meat in refrigerated railroad cars to the East Coast. In the process, the company redrew the map of meat production. Once the viability of long-distance transportation had been demonstrated, meatpacking on a national, centrally controlied scale became possible. Other companies such as Oscar Meyer rapidly spread their operations to take advantage of the entrepreneurial possibilities, setting up processing plants, stockyards, feeding stations, and auction sites at key points in the countrys new railroad network. Like the changes overhauling wheat farming, the revolution in meat production took farmers markets out of locai orbits and placed them in national as well as international hands.

Agrarian Protest. From the perspective of American farmers, these changes interposed a host of monopolistic middlemen between them and their markets. Railroads controlied shipments (without which crops or livestock were virtually worthless) and manipulated rates in ways that favored large shippers and penalized average farmers. Banks, mortgage associations, and other moneylenders demanded what farmers considered to be extortionate rates. Warehouse, elevator, and stockyard operators held broad leverage over how agricultural produets were marketed and at what price. As a result, agrarian protest rose against eastern financial and business interests. This sentiment had been centrai in the organization of the Grange in 1867 and the farmers alhances of the 1870sefforts by farmers collectives to control shipments, the marketing of crops, and the supply of seed and implements. These efforts continued in the 1880s as farm prices slowly declined. Farmers in the West, meanwhile, pressured their state legislatures to establish railroad regulations and the federai government to ease monetary policies by issuing greenbacks or coining silver currency. The Depression of 1893 made the farmers plight especially acute, bringing many to rum. Only the recovery of farm prices after 1897 brought relief.


The changes that overtook agriculture over the last dozen or so years of the century were nearly as dramatic as those transforming industry, Farm-ing stili made up a substantial part of the econ-omy, but one declining in relative importarle. In 1870 just over half of the American workfcrce, 53 percent, made their living on farms. By 1890 the proportion had dropped to 42 percent. Stili, agricultural production expanded, and the number of farms grew, from 4 million in 1877 to 4.5 million in 1890. At the same time, the farms mechanized; during this same period, the total value of American farm machinery climbed from $42 million to over $100 million. By 1890 more than nine hun~ dred American companies were manufacturing agricultural machinery, producing more than $92 million worth of machines annually, including plows, harvesters, threshers, twine binders, dairy centrifuges, sprayers, pumps, and other imple-ments, Mechanization affected ali kinds of farms, but took root especially strongly in the upper Mississippi basin, on cereal farms in the northern plains. Here, over the late 1870s and 1880s new bonanza farms sprouted, spreading across thou-sands of acres each, marshaling heavy machinery and platoons of migratory workers workforces of several hundred and more to harvest their crops. These farms were not yet typical, but already they were signaling the direction American farming would take in the twentieth century.

Sources: John A. Garraty, The New Commonwealth, 1877-1890 ( New York: Harper 8c Row, 1968);

Fred A. Shannon, The Farmers Last Frontier: Agriculture, 1860-1897 (New York: Holt, Rinehart & Winston, 1945)


William Cronon Natures Metropolis: Chicago and the Great West (New York & London: Norton, 1991);

Fred A. Shannon, The Farmers Last Frontier: Agriculture, 1860-1897 (New York: Farrar & Rinehart, 1945).

Agricultural Economics

views updated May 18 2018

Agricultural Economics


The field of agricultural economics deals with resource allocation and utilization and income distribution and growth in land-intensive activities. Traditionally such activities were confined to crops and livestock production, which, accordingly, have been the accepted domain of agricultural economics. As the relative economic importance of agriculture declines (steeply in the case of the industrialized nations) and as natural resource depletion and degradation loom large, agricultural economics has come to be seen as inseparable from the economics of renewable resources and the environment.

Established areas of study in agricultural economics include farm-level decision making, production economics and resource use efficiency, household economics and consumer behavior, agricultural markets and market outcomes, food safety and variety, international trade in agricultural commodities, and nutrition. The contemporary field includes natural resource and environmental economics, agribusiness, forestry economics, and aspects of health economics, community and rural development, food security, and economic development (see, for example, Cramer, Jensen, and Southgate, 2001).

The affinity between traditional agricultural economics and environmental and resource economics is more than a matter of their common concerns with land, water, and other natural resources; it is also rooted in shared principles and methods of research. This accounts for the reincarnation of most academic departments of agricultural economics as departments of agricultural and resource economics since the early 1980s.

Agricultural economics is a branch of neoclassicism, the reigning paradigm in economics. Its origins are coterminous with the ascendancy of neoclassicism from the 1870s on. Indeed, agricultural economics has provided its parent with the archetype of the neoclassical textbook ideal: firms without market power (farms), workers without bosses (peasant families), and products without private identities (cereal commodities). This model remains the hobbyhorse not just of agricultural economists but of economists generally; ironically, though, agricultural markets have long ceased to be guided by the invisible hand, given ubiquitous state interventionism. Nonagricultural markets ruled by competition, on the other hand, have long been exceptions, not the rule.

Apart from supplying a deceptively persuasive model bolstering neoclassical preconceptions, the theoretical significance of agricultural economics consists in its unwavering adherence to these preconceptions. Agricultural economics has always been highly micro-oriented in both theoretical and empirical analyses, relying on the standard models of rational decision making by households (as both consumers and producers) and of profit-maximizing farms (see Norton 2004).

Claiming universal validity for this paradigm, Nobel prize winner Theodore Schultz famously described developing nations agriculture-dominated economies as poor but efficient, a narrowly technical-economic conclusion that seemed incongruous with endemic resource under-utilization, including underemployment, egregious social structures of exploitation, and momentous instances of agrarian conflict and revolution (Rao 1986).

If agricultural economics deals with the narrowly technical issues of resource allocation and utilization that arise in our relation to nature and its cultivation, agrarian economics may be taken to deal with broader issues of social structure and regulation that arise in our relation to each other as we relate to nature. Advancing socially relevant knowledge in these twin fields is vital to our future. But this will depend on conscious efforts to integrate the twin fields rather than, as agricultural economics has done, ignoring the social dimension by hypostatizing itself.

SEE ALSO Agribusiness; Agricultural Industry; Development Economics; Economics; Economics, Classical; Green Revolution; Harris-Todaro Model; North-South Models; Optimizing Peasant; Peasantry; Primitive Accumulation; Production; Production Frontier; Quota System, Farm; Rent; Returns, Diminishing; Returns, Increasing; Returns to a Fixed Factor; Returns to Scale; Slavery; Stages of Life; Subsidies, Farm; Subsistence Agriculture


Cramer, Gail L., Clarence W. Jensen, and Douglas D. Southgate Jr. 2001. Agricultural Economics and Agribusiness. New York: Wiley.

Norton, Roger D. 2004. Agricultural Development Policy: Concepts and Experiences. Hoboken, NJ: Wiley.

Rao, J. Mohan. 1986. Agriculture in Recent Development Theory. Journal of Development Economics 22(1): 41-86.

J. Mohan Rao

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Agricultural Economics

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